Chapter 14

Lean Operations

Chapter 14: Learning Objectives

You should be able to:
LO 14.1 Explain the terms lean operations and JIT
LO 14.2 Describe the main characteristics of lean systems
LO 14.3 List the five principles of the way lean system function
LO 14.4 List some of the benefits and some of the risks of lean operations
LO 14.5 Describe the Toyota Production System (TPS)
LO 14.6 List the three goals of a lean system and explain its importance of each
LO 14.7 List the eight wastes according to lean philosophy
LO 14.8 Identify and briefly discuss the four building blocks of a lean production system
LO 14.9 Describe key lean improvement tools
LO 14.10 Outline considerations for successful conversion from a traditional system to a lean system
LO 14.11 Describe some of the obstacles to lean success

Lean Operations
 Lean operation
 A flexible system of operation that uses considerably less resources than a traditional system
 Tend to achieve
 Greater productivity
 Lower costs
 Shorter cycle times
 Higher quality
 Just-in-Time
 A highly coordinated processing system in which goods move through the system, and services are
performed, just as they are needed

Lean System Characteristics

 A number of characteristics are commonly found in lean systems:
 Waste reduction
 Continuous improvement
 Use of teams
 Work cells
 Visual controls
 High quality
 Minimal inventory
 Output only to match demand
 Quick changeovers
 Small lot sizes
 Lean culture

Lean System Principles

 Five principles embody the way lean systems function:
1. Identify customer values
2. Focus on processes that create value
3. Eliminate waste to create “flow”
4. Produce only according to customer demand
5. Strive for perfection

Benefits & Risks of Lean Systems

 Key benefits
  Reduced waste
 Lower costs
 Increased quality
 Reduced cycle time
 Increased flexibility
 Increased productivity
 Critical risks
 Increased stress on workers
 Fewer resources available if problems occur
 Supply chain disruptions can halt operations

Lean Operations: The Beginning

 Lean operations began as lean manufacturing, also known as JIT in the mid-1900s
 Developed by Taiichi Ohno and Shigeo Shingo of Toyota
 Focus was on eliminating all waste from every aspect of the process
 Waste is viewed as anything that interferes with, or does not add value to, the process of
producing automobiles

Lean: Ultimate Goal

 The ultimate goal:
 Achieve a balanced system–
 One that achieves a smooth, rapid flow of materials and/or work through the system

Lean: Supporting Goals

 The degree to which lean’s ultimate goal is achieved depends upon how well its supporting goals are achieved:
1. Eliminate disruptions
2. Make the system flexible
3. Eliminate waste, especially excess inventory

Waste
 Waste
 Represents unproductive resources
 Eight sources of waste in lean systems:
1. Excess inventory
2. Overproduction
3. Waiting time
4. Unnecessary transporting
5. Processing waste
6. Inefficient work methods
7. Product defects
8. Underused people

Kaizen
 The kaizen philosophy for attacking waste is based upon these ideas:
1. Waste is the enemy, and to eliminate waste it is necessary to get the hands dirty
2. Improvement should be done gradually and continuously; the goal is not big improvements done
intermittently
3. Everyone should be involved
4. Kaizen is built on a cheap strategy, and it does not require spending great sums on technology or
consultants
5. It can be applied everywhere
6. It is supported by a visual system
7. It focuses attention where value is created
 8. It is process oriented
9. It stresses that the main effort for improvement should come from new thinking and a new work style
10. The essence of organizational learning is to learn while doing

Lean: Building Blocks

 Product design
 Process design
 Personnel/organizational elements
 Manufacturing planning and control

Building Blocks: Product Design

 Four elements of product design important for lean systems:
1. Standard parts
2. Modular design
3. Highly capable systems with quality built in
4. Concurrent engineering

Building Blocks: Process Design

 Eight aspects of process design that are important for lean systems:
1. Small lot sizes
2. Setup time reduction
3. Manufacturing cells
4. Quality improvement
5. Production flexibility
6. A balanced system
7. Little inventory storage
8. Fail-safe methods

Process Design: Small Lot Sizes

 In the lean philosophy, the ideal lot size is one
 Benefits of small lot size
 Reduced in-process inventory
 Lower carrying costs
 Less storage space is necessary
 Inspection and rework costs are less when problems with quality do occur
 Permits greater flexibility in scheduling
 Less inventory to ‘work off’ before implementing product improvements
 Increased visibility of problems
 Increased ease of balancing operations

Process Design: Setup Time Reduction

 Small lot sizes and changing product mixes require frequent setups
 Unless these are quick and relatively inexpensive, they can be prohibitive
 Setup time reduction requires deliberate improvement efforts
 Single-minute exchange of die (SMED)
 A system for reducing changeover time
 Group technology may be used to reduce setup time by capitalizing on similarities in recurring
operations

Process Design: Manufacturing Cells

 One characteristic of lean production systems is multiple manufacturing cells
 Benefits include
 Reduced changeover times
  High equipment utilization
 Ease of cross-training workers

Process Design: Quality Improvement

 Quality defects during the process can disrupt the orderly flow of work
 Autonomation (jidoka)
 Automatic detection of defects during production
 Two mechanisms are employed
1. One for detecting defects when they occur
2. Another for stopping production to correct the cause of the defects

Process Design: Work Flexibility

 Guidelines for increasing flexibility
1. Reduce downtime due to changeovers by reducing changeover time
2. Use preventive maintenance on key equipment to reduce breakdowns and downtime
3. Cross-train workers so they can help when bottlenecks occur or other workers are absent
4. Use many small units of capacity; many small cells make it easier to shift capacity temporarily and to add
or subtract capacity
5. Use off-line buffers. Store infrequently used safety stock away from the production area
6. Reserve capacity for important customers

Process Design: Balanced System

 Takt time
 The cycle time needed to match customer demand for final product
 Sometimes referred to as the heartbeat of a lean system
 Takt time is often set for a work shift
 Procedure:
1. Determine the net time available per shift
2. If there is more than one shift per day, multiply the net time by the number of shifts
3. Compute the takt time by dividing the net available time by demand

Process Design: Inventory Storage

 Lean systems are designed to minimize inventory storage
 Inventories are buffers that tend to cover up recurring problems that are never resolved
 Partly because they are not obvious
 Partly because the presence of inventory makes them seem less serious

Process Design: Fail-Safe Methods

 Poka-yoke (Fail-safing)
 Building safeguards into a process to reduce or eliminate the potential for errors during a process
 Examples:
 Electric breakers
 Seatbelt fastener warnings
 ATMs that signal if a card is left in a machine
  Designing parts that can only be assembled in the correct position

Building Blocks: Personnel/Organizational

 Five personnel/organizational elements that are important for lean systems:
 Workers as assets
 Cross-trained workers
 Continuous improvement
 Cost accounting
 Leadership/project management

Personnel/Organizational:
Workers as Assets
 Workers as assets
 Well-trained and motivated workers are the heart of the lean system
 They are given greater authority to make decisions, but more is expected of them

Personnel/Organizational:
Cross-Trained Workers
 Cross-trained workers
 Workers are trained to perform several parts of a process and operate a variety of machines
 Facilitates flexibility
 Helps in line balancing

Personnel/Organizational:
Continuous Improvement
 Continuous improvement
 Workers in lean systems have greater responsibility for quality, and they are expected to be involved in
problem solving and continuous improvement
 Lean workers receive training in
 Statistical process control
 Quality improvement
 Problem solving

Personnel/Organizational: Cost Accounting

 Cost accounting
 Activity-based costing
 Allocation of overhead to specific jobs based on their percentage of activities

Personnel/Organizational: Leadership
 Leadership/project management
 Managers are expected to be leaders and facilitators, not order givers
 Lean systems encourage two-way communication between workers and managers

Building Blocks: MPC

 Seven elements of manufacturing planning and control (MPC) are particularly important for lean system:
1. Level loading
2. Pull systems
3. Visual systems
4. Limited work-in-process (WIP)
5. Close vendor relationships
6. Reduced transaction processing
7. Preventive maintenance and housekeeping
MPC: Level Loading
 Lean systems place a strong emphasis on achieving stable, level daily mix schedules
 MPS – developed to provide level capacity loading
 Mixed model scheduling
 Three issues need to be resolved
 What is the appropriate product sequence to use?
 How many times should the sequence be repeated daily?
 How many units of each model should be produced in each cycle?

MPC: Pull Systems

 Push system
 Work is pushed to the next station as it is completed
 Pull system
 A workstation pulls output from the preceding workstation as it is needed
 Output of the final operation is pulled by customer demand or the master schedule
 Pull systems are not appropriate for all operations
 Large variations in volume, product mix, or product design will undermine the system

MPC: Visual Systems

 Kanban
 Card or other device that communicates demand for work or materials from the preceding station
 Kanban is the Japanese word meaning “signal” or “visible record”
 Paperless production control system
 Authority to pull, or produce, comes from a downstream process
 Two main types of kanbans:
 Production kanban (p-kanban): signals the need to produce parts
 Conveyance kanban (c-kanban): signals the need to deliver parts to the next work center

MPC: Limited WIP

 Benefits of lower WIP
 Lower carrying costs
 Increased flexibility
 Aids scheduling
 Saves costs of scrap and rework if there are design changes
 Lower cycle-time variability

MPC: Close Vendor Relationships

 Lean systems typically have close relationships with vendors
 They are expected to provide frequent, small deliveries of high-quality goods
 A key feature of many lean systems is the relatively small number of suppliers used

MPC: Reduced Transaction Processing

 Lean systems seek to reduce costs associated with the ‘hidden factory’:
 Logistical transactions
 Balancing transactions
 Quality transactions
 Change transactions

Preventive Maintenance and Housekeeping

 Preventive maintenance
 Maintaining equipment in good operating condition and replacing parts that have a tendency to fail
before they actually do fail
 Housekeeping
  Maintaining a workplace that is clean and free of unnecessary materials

Lean Tools: Value Stream Mapping

 Value stream mapping
 A visual tool to systematically examine the flows of materials and information
 Its purpose is to help identify waste and opportunities for improvement
 Data collected:
 Times
 Distances traveled
 Mistakes
 Inefficient work methods
 Waiting times
 Information flows

Lean Tools: 5W2H & Six Sigma

 5W2H
 A method of asking questions about a process that includes what, why, where, when, who, how, and
how much
 Lean and Six Sigma
 Lean and Six Sigma can be viewed as two complementary approaches to process improvement
 Lean focuses on eliminating non-value-added activity to maximize process velocity
 Six Sigma seeks to eliminate process variation
 Together the two approaches can achieve process flow and quality

Transitioning to Lean Systems

1. Make sure top management is committed and that they know what will be required
2. Decide which parts will need the most effort to convert
3. Obtain support and cooperation of workers
4. Begin by trying to reduce setup times while maintaining the current system
5. Gradually convert operations, begin at the end and work backwards
6. Convert suppliers to JIT
7. Prepare for obstacles

Obstacles to Conversion
1. Management may not be fully committed or willing to devote the necessary resources to conversion
2. Workers/management may not be cooperative
3. It can be difficult to change the organizational culture to one consistent with the lean philosophy
4. Suppliers may resist
The forecast for each period is 70 units. The starting inventory is zero. The MPS rule is to schedule production if the
projected inventory on hand is negative. The production lot size is 100 units. The following table shows committed
orders
Period 1 2 3 4 Customer orders 80 50 30 10

The following product structure tree indicates the components needed to assemble one unit of product x. determine the
quantities of each component needed to assembler 100 units of x